Section 10B deduction and eligible profit computation must proceed without denying relief for missing separate ratification or prior loss set-off.

Deduction under section 10B could not be denied merely because the STPI approval was not separately ratified by the Board of Approval where the unit had been approved by the Director, STPI and the record showed the ratification process had been placed before the Board; on those facts, the statutory conditions were treated as satisfied. The deduction was also to be computed at the stage of business income of the eligible undertaking, without first setting off losses of other units or brought forward losses. The Revenue's appeals were rejected and the assessee's relief was sustained.

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Issues: (i) Whether deduction under section 10B could be denied merely because the STPI approval was not separately ratified by the Board of Approval, despite approval by the Director, STPI and evidence that ratification had been placed before the Board; (ii) Whether deduction under section 10B had to be computed after setting off losses of other units and brought forward losses before allowing the deduction.

Issue (i): Whether deduction under section 10B could be denied merely because the STPI approval was not separately ratified by the Board of Approval, despite approval by the Director, STPI and evidence that ratification had been placed before the Board.

Analysis: The unit was approved by the Director, STPI, and the record showed that the approval process had been taken up for ratification before the Board of Approval in the subsequent meetings. The absence of a separate ratification certificate, by itself, was not treated as fatal where the assessee had produced material showing that the approval had been processed in the prescribed manner. The governing approach was that the conditions for deduction under section 10B stood satisfied on the facts.

Conclusion: The issue was decided in favour of the assessee. Deduction under section 10B could not be denied on the ground urged by the Revenue.

Issue (ii): Whether deduction under section 10B had to be computed after setting off losses of other units and brought forward losses before allowing the deduction.

Analysis: The deduction under section 10B was treated as a deduction to be worked out at the stage of computing business income of the eligible undertaking. The principle applied was that the eligible profits are to be considered without first reducing them by losses of other units or brought forward losses, and the reasoning followed the settled approach applicable to special deduction provisions of this kind.

Conclusion: The issue was decided in favour of the assessee. The deduction was to be computed without setting off the losses of other units or brought forward losses first.

Final Conclusion: The Revenue's appeals were rejected and the relief granted to the assessee was sustained in full.

Ratio Decidendi: Where the assessee establishes valid approval for the eligible unit and the statutory conditions for section 10B are otherwise met, the deduction cannot be denied merely because a separate ratification certificate is not issued; the eligible deduction is also to be computed at the business stage without first adjusting losses of non-eligible units or earlier years' losses.

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